23 Jan 2009 To: Dividend Investments Brokers From: Bertus van Zyl On Tuesday the 20th Jan a special general meeting of shareholders was held for the Zambezi syndication done by Dividend Investments. The purpose of the meeting was to consider the sale of the property to Capicol, the developer of this shopping centre and also the company that sold phase three to Sharemax. When City Capital took over the management of the Dividend syndications we asked valuers to place a value on all the syndication properties. The value that they gave to the Zambezi Phase 1 & 2 was approximately R76m. Dividend syndicated these two phases for R126m. This potential loss of R50m is something we clearly could not accept and negotiated a transaction where the property will be sold back to the developer at a price where we at least can get the investors capital back. All investors have to date received their monthly income and I therefore considered this offer an acceptable one given that the Zambezi syndication has a significant cash shortfall every month. This cash shortfall is currently being propped up by City Capital on a loan basis until the syndication structure could be normalised. Due to the structure of the Dividend syndications and the shareholders agreements signed by their investors, a vote of 75% of all the shareholders is required to dispose of the property. This was not achieved due to two factors; 1. Shareholder apathy 2. Active campaigning against the decision by certain brokers Shareholders apathy Apathy is described as indifference, lack of concern, lack of interest, laziness etc. I am sure that I am not describing the vast majority of shareholder, but with such a low voting percentage it will be difficult to get anything done with the Dividend syndications if we do not encourage more people to vote. Those people that attended the meeting voted yes except for some broker(s) who actively campaigned against the decision. The resolution to sell the building was therefore not carried and the status quo remains. The result of the motion not being carried is that no further loans will be extended to the Zambezi syndication by City Capital and investors will from this month only receive the net proceeds produced by the property. This will mean a significant reduction in income for the 100’s of investors in Zambezi. I will shortly be writing a letter to the shareholders in the Zambezi syndication explaining the situation as well as the risks they are now exposed to. It furthermore means that debenture holders can sue the company for their income making the possibility of liquidation a reality. City Capital cannot continue to make loans where the shareholders are unwilling to be part of the solution as it places them in an unacceptable risk position. City Capital will also not make any more loans to any syndication after Feb 09. It is therefore imperative that we act quickly to normalise all syndications and get them to a sustainable position before the end of February if all investors are to receive their monthly income or will be able to exit the investment in a satisfactory manner. The risk of not acting is that any debenture holder, Dividend Investments or City Capital (where they have loans) or SARS can apply for the liquidation of the syndication. This will mean a forced sale of the property and liquidation fees, all of which will erode the shareholder’s capital. Due to the debenture structure of these syndications (specifically the income syndications) it is near impossible to get bank finance once they understand the full picture. I therefore urge you to speak to your clients and when they receive letter from us ask them to contact you so they can respond. We will also keep you updated when we send letter to shareholders. We will be having meetings during February where your clients will be able to exercise his/her option with regards to the future. I am fighting for the investors as best I can. Please support me to get closure on this drawn out syndication saga. Active campaigning by a few There are some (and perhaps only one) brokers that are actively working against anything we do. I say we because I am personally being targeted even though we have a full board of Directors looking after the affairs of City Capital. By extension then, if I am criticized it reflects on the board of directors. I do not act alone! To police our actions we have external directors in line with the King reports on good corporate governance. In our case these are Alan le Roux (ALR Property Ventures) and Herman Kriel (Ex Sanlam) and I would encourage you to look at the background and professional qualifications of these gentlemen. Herman, as an accountant, is also the chairman of our audit committee and together with Willie Viviers (our Financial Director and ex-PWC partners) and others are responsible for ensuring the systemic well-being of our financial affairs. The claims made by people like Andre Mathews needs to be scrutinized for facts before you just believe what he says. Large volumes of words and numbers presented in all the colours of the rainbow do not equal facts. Speak to me before you act on hearsay and uninformed conclusions proclaimed by someone with a clear personal motive.